Every building had a different way of computing the shares per apartment. In our neighborhood, we are one of two virtually identical buildings, e.g.: number of apartments, floors, size of apartments, etc. Our total share count is near 90,000, while the nearby “twin” share count is closer to 60,000. Both buildings have 500 units. Floor plans are identical. Both converted to co-op on the same day.

In my co-op building, the cost for a three bedroom apartment with about 1,500 sq. ft. is $1,800 a month for ten months and $1,550 for the other two months. But be very careful in comparing this cost with any other building.

This cost is inclusive of the pro-rata cost of operating a central heating and a central air conditioning plant, as well as the regular maintenance, taxes, yearly assessment (spread over ten months) and indoor parking.

The only added cost is the electric bill for lights, window units (not PTAC, just fans as the central plant provides heating and cooling liquid to the pipe/fins in the unit), TV, PC and that’s it. All kitchen stoves are natural gas fed and that cost is in the monthly maintenance. And, the building supports a valet cleaners, security (24x7), doorman (24x7), porters and maintenance staff, tennis courts, basketball court, outdoor pools (3) and playground.

Of the $1,800 for the ten months in which the assessment is collected (tax isolation purposes), the assessment for the three bedroom unit totals about $2,500 a year. Based on all shares outstanding, the co-op now collects about $850,000 a year for capital improvements. The assessment was not always at this level as it has been raised about 50 cents a year over the life of the co-op.

Also, the co-op has no underlying mortgage, having retired the original mortgage without ever extending it, taking a 2nd mortgage or refinancing. And by comparison, the “twin” today has a $20,000,000 underlying mortgage having refinanced multiple times.

During the past 25 years, our co-op expended about $15,000,000 in capital improvements e.g.; refurbished upper and lower parking levels, upgraded recreation deck, rebuilt our outdoor pool, performed façade upgrades, replaced about 80% of all windows (remainder are to be completed in 2010), elevators (total overhaul and upgrade), central site cooler/evaporator systems replaced, automated controls installed for heat, domestic hot water and chiller systems, outside driveways and parking completely replaced, all curbs and sidewalks replaced, generator installed for emergency pump, lighting and some elevator operation, installed a new roof (32,000 sq. ft.) installed safety rails around the edge of the flat roof as building had none, refurbished all terraces (most units have a terrace).

Oh and our co-op is one of the lowest cost residences in our neighborhood and we are considered a luxury co-op.

So there are two reserves. Our capital reserves fluctuate and probably never go below $250,000 at year end. Our cash reserve is enough for two months maintenance. And we have a ten digit line of credit at very good banking terms as a safety net. The credit line is employed to pay for capital expenditures only in anticipation of assessment income. We always pay off the line of credit by year end.

It has been said in these forums that every building should collect 13 to 14 months of maintenance. I would agree and lean towards the two extra month value as all buildings age and capital improvements are de rigeuer.

The worst scenario is to take on an interest only mortgage (e.g.: balloon payment) to finance current capital expenditures, thus enjoying short term lower costs and saddling future residents with the costs incurred by past shareholders. In my view, this form of “deferred” financing is fiduciary impropriety or malfeasance.

Finally, our costs each year rise between 3.0% to 4.5%, almost in line with the historic inflation rate.